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Ch. 6 - Cost Leadership This chapter describes how a firm can choose a cost leadership buisness strategy to can gain an advantage by reducing economic cost below the competitors. Microsoft's Cost Leadership Strategies : Microsoft has many sources of cost advantage that allows the business to function without sacrificing quality. Manufacturing : Microsoft has a lean strategy to achieve low cost and high quality simultaneously.  Marketing : Microsoft has reliable products and services that continues to grow due to the proven value. R&D : Microsoft continuously focuses on improving products year after year. This includes trying new software of providing frequent updates to improve software. Finance : Microsoft has a stable financial structure with relatively low cost to operate. Accounting : Microsoft collects data for proper accounting principles that are divided into three segments: Productivity & Buisness, Intelligence cloud, and Personal Computing. Sales : Microsoft focuse

Ch. 5 - Evaluating Firms Strengths & Weaknesses: The Resource-Based View This chapter describes how to evaluate a company based on the various resources of the firm. Microsoft's Recourses : Resource Categories : 1. Financial Capital Microsoft has impressive financial resources including a net income of $44.2 billion and retained earnings of $34.6 billion. 2. Physical Capital Microsoft has a large physical capital including $44.1 billion in property and equiptment. 3. Human Capital Of course Microsoft grew with Bill Gates as founder and CEO, but the firm still has impressive leadership including the current CEO, Satya Nadella. 4. Organizational Capital Microsoft is a strongly structured organization with excellent systems in place for continued success. Microsoft absolutely has sustained competitive advantage and distinctive competence that can be shown through the VRIO Framework . Value : Does Microsoft’s resources and capabilities enable the firm to respond to environmental th

Ch. 4 - Evaluating Environmental Opportunities This chapter speaks about how to take advantage of opportunities and evaluate treats as an opportunity to neutralize. Microsoft falls into multiple strategies across this chapter : Network industry ( "increasing-returns" industry ) In the emerging market of personal computers, Microsoft made the ultimate network decision to bundle the software "Internet Explorer" for free with every Windows operating machine. This gave customers free access to the internet and allowed Microsoft to grow exponentially as more people wanted to connect with one another on the same platform. The firms decision to provide free software for internet access, rather than charge an extra price for the software, vaulted Microsoft into a monopoly in the personal computing realm, and extended the position by forcing free internet to be the industry standard. First movers advantage Building off the early success, Microsoft used the "first movers

 Chapter 3 - Evaluating Environmental Threats This chapter discusses how to identify and neutralize environmental threats and introduces some models. Interestingly enough the book uses Microsoft as an example for the Structure-Conduct-Performance (SCP) model. They describe Microsoft as a monopoly with the following SCP model: Structure (industry) - One firm - Costly entry Conduct options - Use market power to set prices Performance - Competitive advantage Since the SCP model was given in the book, I'll will use Michael Porter's Five Forces model for the environmental threats of Microsoft. 1. Threat of Entry - There is a moderate treat of a new entry against Microsoft due to potential success of a lower switching cost.  2. Threat of Rivals - There is a strong threat from rivals against Microsoft. Many companies such as apple are trying innovative ways to produce computers and software that is easy to use and attractive to consumers. 3. Threat of Substitutes - There is a weak thr

Ch. 2 - Firm Performance and Competitive Advantage This chapter gives detail and measurements on how to determine if a firm is doing well. The ability to create more economic value than rivals is competitive advantage. Next the chapter gives many quantifiable measurements and calculations to determine a firm's competitive advantage. Finally the chapter touches on stakeholders and how various stakeholders' may judge performance differently. Microsoft : When speaking about competitive advantage, Microsoft tends to have a sustained competitive advantage, especially in the software and personal computer segment. Of course there are moments of temporary disadvantage when the rival companies such as Apple are able to grab at some economic value.  There were many quantifiable measures to determine competitive advantage. Microsoft's economic profit calculation for 2020 is shown below: Net operating profit after taxes (NOPLAT) - 46,746 million Cost of capital - 11.92% Invested capit